South Africa needs to solve its Eskom problem

Since 2010, South Africa’s renewables programme has attracted 194bn rand ($14.8bn) of new investment, representing the largest source of investment growth in the SA economy in recent times.

To date, the programme has created 26,790 jobs, of which 47% are occupied by youth and women, and it will result in 92.1bn rand being committed to socio-economic development in mainly rural communities over projects’ 20-year contract periods.

By April 2015, the Minister of Energy had announced 37 preferred bidders in three bid windows from the government’s acclaimed Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). These preferred bidders should have signed power purchase agreements (PPAs) with state utility Eskom by no later than April 2016. Instead, Eskom is still refusing to sign. It cites several reasons for its non-cooperation.

1) Renewable IPPs are too costly for Eskom

It is a simple fact that energy from IPPs will generally cost Eskom more than the price that it will sell the energy at. This is not specific to renewables generators. Energy from a new nuclear power station will also be more expensive than the average retail tariff.

It is also important to note that renewable energy is procured through a highly competitive REIPPPP auction process. This competition has led to very significant reductions in renewable tariffs over the five bid rounds. Renewable energy is now the cheapest option available to the country and will actually reduce Eskom’s input costs in future. The Department of Energy recently announced that the average tariff for both wind and solar is just 0.62 rand per kWh, which is in fact well below Eskom’s average selling tariff of around 0.83 rand/kWh in 2017.

2) Renewable energy will cause Eskom to close coal power stations

Recently Eskom has announced the early retirement of five coal-fired power stations, citing the need to pay for renewable power as a reason for this decision. Coal power stations will certainly close. But not because of renewable power.

Eskom has had a plan to close its coal plants since they were first commissioned. Coal plants have a limited life, as do the mines that feed them. Eskom’s generation license requires these plants to be decommissioned as they reach the end of their design life and become too expensive to operate and maintain. It is completely misleading to blame renewables for this natural process.

3) There is a risk of over-supply of electricity

There is indeed a risk that South Africa may be entering into a period where electricity supply exceeds demand. If Eskom does indeed have serious concerns about the supply-demand balance then it should consider delaying mega-coal-plants Medupi or Kusile, or indeed cancelling some of their generation units. Instead Eskom has chosen to delay the construction of Government’s duly procured renewable energy projects which, by virtue of their much smaller scale, will have far less impact on the supply-demand balance than these two massive coal plants.

In conclusion

South Africa is in a watershed process of transitioning to renewable energy for multiple reasons, including the need to reduce national carbon emissions and transition to a more diverse energy economy. The fact that renewable power is on a declining cost curve helps to make the transition easier.

The South African Wind Energy Association (SAWEA) continues to work to ensure that SA’s renewable power programme will continue its intended trajectory of growth, so that investment benefits across the full wind value chain can be realized. Benefits that accrue to job creation, rural communities, youth and women in particular, are at the top of SAWEA’s list of priorities.

Brenda Martin is chief executive of the South African Wind Energy Association

South Africa needs to solve its Eskom problem

Since 2010, South Africa’s renewables programme has attracted 194bn rand ($14.8bn) of new investment, representing the largest source of investment growth in the SA economy in recent times.

To date, the programme has created 26,790 jobs, of which 47% are occupied by youth and women, and it will result in 92.1bn rand being committed to socio-economic development in mainly rural communities over projects’ 20-year contract periods.

By April 2015, the Minister of Energy had announced 37 preferred bidders in three bid windows from the government’s acclaimed Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). These preferred bidders should have signed power purchase agreements (PPAs) with state utility Eskom by no later than April 2016. Instead, Eskom is still refusing to sign. It cites several reasons for its non-cooperation.

1) Renewable IPPs are too costly for Eskom

It is a simple fact that energy from IPPs will generally cost Eskom more than the price that it will sell the energy at. This is not specific to renewables generators. Energy from a new nuclear power station will also be more expensive than the average retail tariff.

It is also important to note that renewable energy is procured through a highly competitive REIPPPP auction process. This competition has led to very significant reductions in renewable tariffs over the five bid rounds. Renewable energy is now the cheapest option available to the country and will actually reduce Eskom’s input costs in future. The Department of Energy recently announced that the average tariff for both wind and solar is just 0.62 rand per kWh, which is in fact well below Eskom’s average selling tariff of around 0.83 rand/kWh in 2017.

2) Renewable energy will cause Eskom to close coal power stations

Recently Eskom has announced the early retirement of five coal-fired power stations, citing the need to pay for renewable power as a reason for this decision. Coal power stations will certainly close. But not because of renewable power.

Eskom has had a plan to close its coal plants since they were first commissioned. Coal plants have a limited life, as do the mines that feed them. Eskom’s generation license requires these plants to be decommissioned as they reach the end of their design life and become too expensive to operate and maintain. It is completely misleading to blame renewables for this natural process.

3) There is a risk of over-supply of electricity

There is indeed a risk that South Africa may be entering into a period where electricity supply exceeds demand. If Eskom does indeed have serious concerns about the supply-demand balance then it should consider delaying mega-coal-plants Medupi or Kusile, or indeed cancelling some of their generation units. Instead Eskom has chosen to delay the construction of Government’s duly procured renewable energy projects which, by virtue of their much smaller scale, will have far less impact on the supply-demand balance than these two massive coal plants.

In conclusion

South Africa is in a watershed process of transitioning to renewable energy for multiple reasons, including the need to reduce national carbon emissions and transition to a more diverse energy economy. The fact that renewable power is on a declining cost curve helps to make the transition easier.

The South African Wind Energy Association (SAWEA) continues to work to ensure that SA’s renewable power programme will continue its intended trajectory of growth, so that investment benefits across the full wind value chain can be realized. Benefits that accrue to job creation, rural communities, youth and women in particular, are at the top of SAWEA’s list of priorities.

Brenda Martin is chief executive of the South African Wind Energy Association